Industrial Gloom Is Getting Harder to Ignore
Stocks are up, but the pain in manufacturing is starting to become more widespread. Plus, more industrial insights.
The outlook for factories is darkening.
Photographer: ADAM BERRY/Bloomberg
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There’s been plenty of evidence of a slackening in manufacturing activity over the past few months, but you’d hardly know it by looking at industrial stocks. The Industrial Select Sector SPDR Fund is up more than 20% for the year, outpacing the broader S&P 500 Index, and is flirting with its all-time high. Some of this reflects wagers that the Federal Reserve will lower interest rates and keep the equity rally going. With Chair Jerome Powell all but announcing this week there will be a rate cut in July, there’s some logic in that. But UBS Group AG strategist Francois Trahan warns that historical precedent indicates rate-cut champagne fizz turns flat once expectations for earnings growth turn negative. And on that front, investors’ hopes are dimming. The question is whether they’ve gotten cautious enough when it comes to the manufacturing sector.